Anyone wanting an overview of the South African government's failures to tackle poverty and inequality need look no further than the recently published “25-Year Review”.
The review lists a number of projects and schemes as part of efforts to reduce unemployment and the “war on poverty”. It then commented that these have not had the “anticipated” impact, even though various government programs have “amplified” its “devastating impact”. Poverty declined between 1993 and 2013, but has increased since then, with unemployment remaining the “largest contributor”. Youth unemployment “increased rapidly” between 2008 and 2018. As far as Black economic empowerment policies are concerned, these have had “negligible impact in redistributing wealth.”
None of this should be a surprise, the Institute of Race Relations (IRR) has repeatedly warned that investment, economic growth and job creation will be undermined by the government's never-ending interventionist policies, including racial preference and pro-union labor legislation.
The review states that “Today, South Africa is the most unequal society in the world”. This claim is based on incomplete evidence. Earlier this year, the Helen Suzman Foundation reported that only 149 of the 218 countries and territories listed by the World Bank reported their Gini coefficients.
Recently published by Statistics South Africa (Stats SA), there is a longer study of “inequality trends”. Using expenditure surveys shows that the Gini coefficient among black Africans in 2015 was higher than the figures for all three minority population groups. Thus the figure for Black African was 0.57 while the figure for Colored people was 0.56, while the figure for Indian/Asian was 0.45 and the figure for White people was 0.41.
Since a Gini coefficient of zero reflects perfect equality, while a coefficient of one reflects perfect inequality, these data mean that inequality among black Africans is greater than among others.
Looking at trends over time, the Gini coefficient shows that overall inequality in South Africa declined somewhat between 2006 and 2015. But if the data are broken down by race, different trends are evident. The disparity among minorities of color remained stable at 0.56. It fell from 0.52 to 0.45 among Indians/Asians and from 0.43 to 0.41 among whites. But the disparity among black Africans increased from 0.54 to 0.57 over the same period.
Accordingly, inequality among black Africans is not only higher than that of other groups, but is also increasing. Statistics SA's figures based on income are different from those based on expenditure, but the trends are similar.
Stats SA comments that the labor market is “crucial” to understanding income inequality. Two-thirds of inequality comes from inequality in earnings, and about half of it is caused by extremely high levels of unemployment. Black Africans are the most “disadvantaged” in finding employment, and they earn “substantially” less than whites. “Proportionately” larger wage increases for highly educated workers have led to a “substantial” increase in inequality.
Comparing incomes, Stats SA reported that the top 10% of black Africans earned 7 times more than the bottom 40%. Comparable figures for the three minority groups were: Colored 4.7 times higher, Indian/Asian 4 times higher, and White 2.4 times higher. These income figures thus also corroborate expenditure figures which show greater “within-group” inequality among black Africans than among the three minority groups.
In contrast to much of the writing on inequality, Stats SA repeatedly refers to the labor market. It said the different “labor market experiences” of different population groups “reflect the still-persisting legacy of apartheid policies”. It also states that inequality in the labor market “has increased in recent times”, although it does not explain how this may be a result of apartheid.
The labor market remains one of the key institutions through which the country's “extraordinarily high levels” of inequality are transmitted. Furthermore, the increase in pay inequality would be “even greater” if the unemployed were included as “zero earners”.
Statistics SA is right to focus on the labor market. The problem with that market is that excessive regulation and union power prevent it from operating efficiently. This results in increasing inequality within the poorest section of the population. Statistics SA talks of “interventions” to reverse inequality. What the country really needs is less intervention and more liberalization.
* John Kane-Berman is a policy fellow at IRR, a think-tank that promotes political and economic freedom. Readers are invited to make their stand with IRR by clicking Here Or send an SMS with your name to 32823. Each SMS costs R1. Ts and Cs apply.